May 14, 2018 / 4:23 PM / 2 months ago

EMERGING MARKETS-Brazil real weakens on election jitters; LatAm currencies down

    By Bruno Federowski
    BRASILIA, May 14 (Reuters) - The Brazilian real weakened on
Monday after a presidential poll showed strong support for
candidates seen by investors as unwilling to pursue a
market-friendly agenda, while the Argentine peso extended its
recent selloff to all-time lows.
    Excluding jailed former president Luiz Inacio Lula da Silva,
who will likely be barred if he registers to run, the Brazilian
survey showed law-and-order congressman Jair Bolsonaro held on
to his lead in early polling ahead of the October elections.
Bolsonaro's statements on economic policy have been erratic.
    Environmentalist Marina Silva, who in the previous elections
was backed by several prominent economists but whose backing in
Congress remains in doubt, was the runner-up, challenged by
leftist Ciro Gomes.
    Traders fear President Michel Temer's successor may back
away from his administration's pledges of fiscal austerity,
privatization and deregulation. Many analysts view the unpopular
program as crucial for Brazil to curb public debt growth and
regain its investment grade credit rating.
    The polling data helped to offset the effect of increased
central bank intervention in the wake of a weekslong emerging
market selloff that drove the Brazilian real and the
Mexican peso to multiyear lows.
    Most Latin American currencies extended losses on Monday due
to lingering concerns that a widening U.S. fiscal deficit and
accelerating inflation could bump up its bond yields, dampening
the allure of emerging-market assets.
    The Argentine peso fell around 5 percent after
the International Monetary Fund (IMF) said a target exchange
rate will not be a condition of a financing deal with Argentina.

    Argentina requested a "high access stand-by arrangement"
from the IMF last week after the peso depreciated rapidly,
prompting the central bank to sell reserves and hike interest
rates to 40 percent in a bid to contain one of the world's
highest inflation rates as well as stop the peso slide.
    Latin American stock markets were mixed as rising crude
prices lifted shares of oil drillers. 
    Brazil's benchmark Bovespa stock index was up 0.6
percent, lifted by shares of state-owned Petróleo Brasileiro SA
.
    Shares of steelmaker Cia Siderúrgica Nacional
also rose ahead of the release of its quarterly earnings after
market close. Analysts at Banco BTG Pactual SA increased their
price-target on the stock to 12 reais from 11 reais, but kept a
"neutral" recommendation.
    
    Key Latin American stock indexes and currencies at 1550 GMT:
 Stock indexes                               daily %    YTD %
                                              change   change
                                   Latest             
 MSCI Emerging Markets              1169.16      0.4     0.52
 MSCI LatAm                         2850.81    -0.71     1.53
 Brazil Bovespa                    85753.24     0.63    12.24
 Mexico IPC                        46652.53    -0.16    -5.47
 Chile IPSA                         5705.63     0.05     2.53
 Chile IGPA                        28838.91     0.15     3.07
 Argentina MerVal                  29942.47      0.3    -0.41
 Colombia IGBC                     12362.10     0.02     8.72
                                                             
 Currencies                                  daily %    YTD %
                                              change   change
                                                      
                                     Latest           
 Brazil real                         3.6253    -0.70    -8.61
 Mexico peso                        19.5400    -0.51     0.81
 Chile peso                          623.68    -0.65    -1.45
 Colombia peso                       2832.6     0.06     5.27
 Peru sol                             3.263    -0.21    -0.80
 Argentina peso (interbank)         24.6000    -5.08   -24.39
                                                      
 Argentina peso (parallel)             25.6    -5.27   -24.88
                                                      
 
 (Reporting by Bruno Federowski; Editing by David Gregorio)
  
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